Luxury

Trent's JV deal for Zara, Massimo has a 'put' edge


The Inditex group, the world’s biggest clothing retailer, said its local partner Trent has a put option to sell its entire holding in their two joint ventures that run Zara and Massimo Dutti stores in India. In its latest annual report, the Spanish group said it holds a call option to buy a 35 per cent stake in Inditex Trent Retail and 49 per cent in Massimo Dutti India from Tata Group’s Trent. “The strike price is set on the basis of the non-controlling shareholder’s share of the equity of the investee when the call option is exercised,” Inditex said in the report.

It did not specify any timeframe for exercising the options.

The fast fashion retailer, which has 23 Zara stores and three Massimo Dutti outlets in India, has directly registered its first fully owned firms in India – Bershka Retail and Zara Home – this year.

India, the world’s most-populous country, is an attractive market for apparel brands, especially with youngsters increasingly embracing western-style clothing. Most of Zara’s back-end and merchandise sourcing are handled by Inditex, while the Tata expertise is mainly for identifying real estate and locations.

Globally, as well as in India, Zara imitates the latest fashion, making affordable versions and stocking them for just a few days.

According to their agreement, Inditex’s JV firms with Trent have to source merchandise only from the Inditex Group and even the choice of product and related specifications are at the Spanish company’s discretion. Trent has always termed its holding as a financial investment.

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In February this year, Trent said it would sell an about 29 per cent stake in its joint venture that runs Massimo Dutti for ‘20.75 crore. Last year it sold a 14.06 per cent stake in the Zara JV for ‘105.08 crore.

“This stake sale close to book value makes us cautious in ascribing a very high value to the JV stake,” Macquarie Equity Research said in a recent research note on Trent. “We believe that since Inditex makes all operating decisions for this JV, its ability to determine pricing is higher and hence we conservatively do not factor in any value from this stake when determining our target price,” it said. Macquarie has a target price of ‘7,000 on Trent shares, which closed Tuesday at ‘5,321 on the BSE.

Zara, which entered the country in 2010, turned profitable the very next year, becoming the quickest among fashion brands to do so in India. However, after initially doubling sales every two years, the brand’s rate of expansion gradually came down in the past few years. Meanwhile, Swedish brand H&M outpaced Zara to become India’s largest clothing brand by revenue in fiscal 2020, helped by aggressive store expansion and lower pricing.

  • Published On Apr 23, 2025 at 07:52 AM IST

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